What vehicles can be used for profit repatriation?
In China the most common forms of foreign invested enterprises are Wholly Foreign Owned Enterprises (WFOE) and Equity Joint Ventures (EJV). Both of these types of enterprises can repatriate their profits. Another option for repatriating profits is using an offshore company to incorporate the WFOE or JV. The offshore company would preferably be located in a low tax jurisdiction close to China. Such a structure keeps the business risk further away from the parent company and functions as a tax-planning instrument. Profit repatriation can also be carried out by a local operation as a branch. The branch is deemed as being a part of an offshore company, thus the income is deemed to be earned by in China by the foreign company and therefore taxable in China. Foreign invested Enterprise's Income Tax and other taxes applicable must be paid before profits can be repatriated to the foreign parent company.
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